Benefi ts 287the FICA tax. Both the employer and the employee continue to pay Medicare
tax, no matter how much is earned.Unemployment Compensation
Unemployment compensation, established as part of the Social Security
Act of 1935, was designed to provide a portion of wages to employees
who have been laid off until they obtain another job. The employer pays
into the unemployment compensation fund at a rate based on the average
number of former employees who have drawn benefi ts from the fund.
The fund is primarily fi nanced through a payroll tax paid to the state and
federal governments based on employees ’ wages. The employer pays state
and federal unemployment taxes. Each state determines its own waiting
period for eligibility, level of benefi ts provided, and the length of time that
benefi ts are paid.Workers ’ Compensation
Workers ’ compensation is an employer - fi nanced insurance program
that provides compensation to employees who are unable to work because
of job - related injuries or illness. Most states have their own workers ’ com-
pensation laws and are responsible for administering their own programs.
For this reason, the levels of protection and the costs of administering
the programs vary by state. Some features that all of the programs have
in common are the following (Commerce Clearing House Business Law
Editors, 1992, p. 8):Workers receive benefi ts for accidental injury; wage loss, medical,
and death benefi ts are provided.
Fault is not an issue; if the employee was somewhat or entirely at
fault in the injury, the employee still has the right to receive workers ’
compensation benefi ts.
In exchange for the assurance of benefi ts, the employee (and the
employee ’ s dependent family members) gives up the right to sue
the employer for damages for any injury covered by a workers ’
compensation law.
Responsibility for administering the system usually resides with a
state board or commission. Employers are generally required to
insure their workers ’ compensation liability through private insurance,
state insurance funds, or self - insurance.